Since compensation is the #1 reason that most people work for a company, HR leaders invest a lot of effort to ensure that compensation is done right. For small companies, the problem with doing it right comes at crunch time: four to eight weeks when compensation numbers are crunched for final reporting.

The 2016 Compensation Impact Report shares findings that clearly separate small business from larger organizations in terms of needs, requirements, and ease of use.

Is compensation software helping them to achieve that goal? We ran a survey of 204 HR professionals about how they were using compensation software. This report reveals what we’ve learned from the experiences and insights shared by HR professionals, from entry level to executive in small, mid-tier, and enterprise businesses.

Hope is in the cloud

If you are considering compensation software, then an important question is, “Do people find these systems effective and good enough to meet their needs?” Most do (see Figures 4 and 5). In particular, organizations are likely to be happy with cloud-based systems.

Takeaways for Small Business

1. Most users are satisfied that compensation software is effective/easy to use and meets most needs (59% and 62%, respectively).

2. However, users are even more likely to be satisfied if it is a cloud-based system (76% and 90%, respectively).

Takeaways for Mid-tier and Enterprise Organizations

1. Mid-tier and enterprise organizations are more likely than small organizations to be satisfied that their compensation software is effective/ easy to use (71% and 74%, respectively).

2. However, users are even more likely to be satisfied if it is a cloud-based system (83% and 89%, respectively).

How much should companies pay?

We asked companies how much they were willing to pay for a compensation planning system. Answers ranged from organizations that couldn’t afford $25 per employee to those that would pay $75 to $100 per employee. This distribution puts the average upper limit at around $50 per employee (see Figure 6).

Graph excludes participants who had “No opinion.”

Takeawaysfor all organizations

1. Most organizations won’t pay more than $50/employee for compensation softwar

2. 14% of organizations, presumably those with complex compensation needs, find that $75-$100/employee is justified.

3. The price will depend on the complexity and requirements of your compensation plan; many suites offer compensation software as a cheap module addition to a suite.

4. Be sure that the solution offered will be able to execute your compensation plan because every business has a unique compensation plan.

Where should you look for the payoff?

The survey showed that HR managers are focusing on whether compensation software can do what they need and do it easily. This isn’t wrong, but to justify an investment in software, don’t just emphasize how it is good for the HR department; instead, emphasize how new software is good for the organization because it improves the firm’s ability to manage compensation.

Takeawaysfor all organizations

1. The big value of compensation software comes from helping the organization to better manage its investment in

2. An important secondary payoff from compensation software is that it improves efficiency within

3. Good compensation management helps to recruit and retain employees.